[Digital Today intern reporter Seung-a Yoo] Tesla is presenting autonomous-driving software as a new growth engine after losing its lead in the electric vehicle (EV) sales race.

As of Oct. 26 (local time), Ars Technica reported that Tesla is moving to boost recurring revenue through subscription software and artificial intelligence (AI) services. It is also reviewing the possibility of a merger with SpaceX as it seeks to strengthen its autonomous-driving competitiveness.

Across the auto industry, efforts are spreading to diversify revenue beyond vehicle sales into software and AI services. Dan Ives (댄 아이브스), a Yorkville Ives technology analyst and partner, stressed the high profitability of software. Tesla is also using its auto business, which accounts for 75 percent of total revenue, as funding for AI investment.

Tesla's competitive environment has changed as Chinese companies take the lead in the EV market and increase software and AI investment. Elon Musk's target of 20 million vehicles in annual sales by 2030 has been lowered to 5 million. Given last year's deliveries were 1.6 million, even that is a challenging goal.

The key to short-term growth is the Full Self-Driving (FSD) software. Musk recently said on an earnings call that FSD is the key factor driving demand, and claimed there is no real competitor among vehicles available for purchase. Still, the current supervised FSD requires the driver to sit in the driver's seat and continuously monitor road conditions.

Among new Teslas sold in North America, the share choosing supervised FSD has exceeded 75 percent. Active subscriptions worldwide total 1.7 million, up 67 percent from a year earlier, and the U.S. subscription fee is $99 a month (about 130,000 won). Tesla did not disclose the scale of recurring revenue from FSD, but Ives forecast that if the subscription share expands from about 10 to 15 percent now to around 50 percent of all customers, it could change the company's profit structure.

The key is regulatory approval. Tesla has not yet received approval in any market for a fully autonomous-driving version that does not require driver supervision. Supervised FSD has been approved in some European countries such as the Netherlands, but a member-state vote to expand it across the European Union (EU) was postponed to December. Volkswagen-backed Xpeng is also seeking European approval for its system, "XNGP". Xpeng's head of legal Ye Qing (정예칭) said the goal is to be among the first companies to win approval once relevant rules are in place.

If a merger with SpaceX goes through, Tesla could integrate AI, materials and manufacturing research and improve access to key components such as semiconductors. On the other hand, there are also concerns that a merger could increase Musk's control and spread the risks of the AI business across the entire group. Jed Dorsheimer (제드 도르스하이머), an analyst at William Blair, said that subject to shareholder and regulatory approvals, Musk's equity control at the merged company could exceed 50 percent.

Tesla's strategy is also affecting traditional automakers. General Motors (GM) hired Sterling Anderson (스털링 앤더슨), a former Tesla employee, to lead autonomous-vehicle development. BMW and Benz are working with Qualcomm and Nvidia to develop a "Level 2 Plus" driver-assistance system that requires continuous driver monitoring. Volvo Cars CEO Hakan Samuelsson (호칸 사무엘손) also assessed that Tesla is leading autonomous-driving technology development in the West.

Competition in the auto industry is now expanding beyond sales volume to autonomous-driving technology and the profitability of subscription software. Attention is focused on whether Tesla can regain the lead it ceded in the EV market through wider adoption of FSD, regulatory approval and cooperation with SpaceX.